Price Discrimination Versus Medical Tourism

In our principles textbook, Tyler and I open our chapter on price discrimination with the following:

After months of investigation, police from Interpol swooped down on an international drug syndicate operating out of Antwerp, Belgium.  The syndicate had been smuggling drugs from Kenya, Uganda and Tanzania into the port of Antwerp for distribution throughout Europe.  Smuggling had netted the syndicate millions of dollars in profit.  The drug being smuggled?  Heroin?  Cocaine?  No, something more valuable, Combivir.  Why was Combivir, an anti-AIDS drug, being illegally smuggled from Africa to Europe when Combivir was manufactured in Europe and could be bought there legally?

The answer is that Combivir was priced at $12.50 per pill in Europe and, much closer to cost, about 50 cents per pill in Africa.  Smugglers who bought Combivir in Africa and sold it in Europe could make approximately $12 per pill, and they were smuggling millions of pills.

Instead of smuggling the drugs to Europe, it’s also possible to send the European and American patients abroad. Gilead’s Solvadi, for example, is a very effective drug used to treat hepatitis C. In the United States a course of treatment costs about about $85,000 but due to an agreement between Gilead and generic manufactures in developing countries, in Egypt, India and much of the developed world it can be had for less than $1000. In an excellent piece, Four Reasons Drugs are Expensive, of Which Two are False, Jack Scannell illustrates the battle between arbitrageurs and pharmaceutical companies:

[The price difference] raises dreams of pharmaceutical tourism: “Enjoy a 12 week Grand Tour, where you can gaze at the awesome pyramids and the inscrutable Sphinx of Giza, explore the treasures of Tutankhamen, gasp at the wonders of Luxor, while basking in the sustained virologic response you can only dream of buying in the US.” Some may dream, but Gilead got there already and put its corporate towels on the sun loungers. Egyptians must prove residency to get Sovaldi. Tourists need not apply.

To prevent resale Gilead requires ID and it labels and tracks every bottle sold abroad:

[Patient IDs] will be used to put an identifying barcode on the bottles they receive with their name and other info. Not only can the code be used to guarantee only residents of the country get the drugs…the provisions require that patients then return a bottle to get a new bottle and allows them to get only one bottle of their prescription at a time, even though allowing them to get multiple bottles could “ease the burden on patients and health providers,” MSF says.

Médecins Sans Frontières are outraged by these restrictions but, as Tyler and I explain, the alternative is no sales in developing countries or one world-price and you can be sure that if there’s one world-price that price will be the US price and not the Egyptian price.

Comments

There is also a lot of arbitrage going on within the EU as countries are permitted to have different prices for pharmaceuticals. Transshipping from one country to another for resale has always caused headaches for the industry. Most medicines are packaged in unit dispensing bottles as opposed to the large bulk packaging in the US. This allows companies to have unique serial numbers on package units and allow for tracking of 'illegally' transshipped product.

In addition, product shipment to one country is based on historical usage patterns which cuts down on transshipping as there will be shortages if too much of the drug is diverted. This is one reason why purchasing pharmaceuticals from Canada is not a long term solution to high US prices since Canada will likely impose an export ban from pharmacies if drug shortages arise.

Tell Doctors Without Borders that if there were no price discrimination between the US and Egypt, and Egyptian prices rose, you would take your US savings in drug prices and make a charitable donation to them with the savings so they could purchase the drugs.

Good piece, thank you.

But are you willing to rip the next politician who says she wants to "lower US drug prices by importing drugs from abroad"? This is the absolute pinnacle of outright fraud from a politician. Anyone who says this is point-blank stating that she thinks you are an idiot.

Would you criticize this politician? Think before you answer, because it's going to be a Dem. Would you?

'This is the absolute pinnacle of outright fraud from a politician'

Competition equals fraud - yes, that sounds exactly the sort of thing that B-B expects to hear from its followers.

Florida GOP governor working with Trump to import cheaper drugs from Canada

Florida Gov. Ron DeSantis (R) on Wednesday proposed importing cheaper prescription drugs from Canada into the state and said that President Trump had given his support to the idea.

2.20.2019

'Think before you answer, because it's going to be a Dem. '

Clearly, another RINO has gone roaming over the Florida health care landscape.

Two RINOs! Maybe Uday will hunt them both down.

Come now, I thought Trump was actually a DINO - maybe I need to switch my news sources..

Thanks Trump!

Various Rs have supported this, dummy.

Internet commerce allows the seller to customize the price paid by the purchaser based on algorithms (that identify the purchaser, the purchaser's location, the frequency the purchaser visits the site and views the particular item, etc.). Is this lawful? Should it be? This isn't new or limited to internet commerce, as auto dealers have customized the price since auto dealers (although the "price" is often illusory). In the small Southern town where I grew up there was a store on the same block as the movie theater operated by a little old man who sold all kinds of new and used merchandise. We would go into the shop after the movie while we were waiting to be picked up by a parent. We thought it odd that none of the items for sale were marked with a price. When asked the price for a particular item, the man would ask how much money we had, and to our amazement, the price would often be about that amount. Of course, drugs aren't just any product, and bring emotion and questions of morality to the issue, unlike the items sold by the little old man.

differential & secret pricing in the u.s.
by ivy league meme zombies is a big factor
in what fubared health care

'the alternative is no sales in developing countries'

The Indians have a different alternative - manufacture it yourself, and tell a company like Gilead tough luck if they won't play ball according to Indian rules.

'or one world-price and you can be sure that if there’s one world-price that price will be the US price and not the Egyptian price'

Not even close in this case - 'The price of sofosbuvir, quoted in various media sources as $84,000 to $168,000 for a course of treatment in the U.S., £35,000 in the UK for 12 weeks has engendered considerable controversy. However, sofosbuvir is significantly more affordable in Japan and South Korea at approximately $300 and $5900 respectively for a 12-week treatment, with each government covering 99% and 70% of the cost respectively.' Then there is Germany - '... negotiations between Gilead and health insurers led to a price of €41,000 for 12 weeks of treatment.'https://en.wikipedia.org/wiki/Sofosbuvir Of course, ribavirin is already out of patent - and arguably sofosbuvir should never have been granted a patent in the first place.

One would have expected the Bartley J. Madden Chair in Economics at the Mercatus Center to be fully aware of just how exceptional the American health care system is, or how drug tourism involving large savings is available to Americans pretty much throughout the entire world, not just the 3rd world.

That’s the answer that a 12 year old would give, yes.

Drugs are extremely high fixed cost, close to zero marginal cost. And of course the only value is in the intellectual property/ability to push drugs through phase 1 - phase 4 clinical trials.

The market is Currently a tragedy of the commons, where the US subsidizes the rest of the world.

By the way, the US sticker prices for these drugs are meaningless and an idiotic comparison. The industry works on rebates and kickbacks. No one is paying the sticker price. What you want is average price paid. Which is still much higher.

'Drugs are extremely high fixed cost'

Which does not describe ribavirin, of course - which is necessary to make Sovaldi effective (among other substances of similar nature). And this does not actually sound like a high fixed cost process - 'Sofosbuvir's U.S. launch was the fastest of any new drug in history. Over 60,000 people were treated with sofosbuvir in its first 30 weeks on the U.S. market, about 5% of the U.S. infected population' Unless, of course, you think those 60,000 people were getting Sovaldi for free. This is the MR comments section, so who knows what one thinks of an essentially guaranteed market of 1.2 million buyers for a product?

'By the way, the US sticker prices for these drugs are meaningless and an idiotic comparison. '

Well, tell it to this guy - 'In the United States a course of treatment costs about about $85,000.' Who, not so coincidentally, is considered to be an informed commentator in this area, being the Bartley J. Madden Chair in Economics at the Mercatus Center.

'where the US subsidizes the rest of the world'

With the apparent willingness of those who are doing the subsidizing. Other countries seem to take a different tack with their pharma companies - oh wait, you probably think that companies like the word's 2nd biggest pharma company Novartis, the 3rd biggest Roche, the 5th biggest Sanofi, 7th biggest GSK (GlaxoSmithKline), 8th biggest AstraZeneca, and 9th biggest Bayer are American companies, don't you?

The American market is a cash cow, and the Swiss probably appreciate that more than most - those profits are always so appreciated by the shareholders. The connection of those profits to their research efforts is probably just a bit less clear cut than what Americans like to tell themselves about how the world needs to be thankful that Americans are fleeced by foreign pharma companies, otherwise the pharma industry would shrivel up and die.

Yes I'm sure companies would invest just as much in R&D if they received a negative return.

Do you honestly think that European companies selling their products in Europe have a negative return?

Or is the difference between fleecing and profit no longer discernible from an American perspective?

But there is no question that no one from any of those European pharma companies (six of the top ten, after all) is ever going to suggest that Americans should pay a penny less for their exceptional health care system, even as they continue to negotiate with European buyers who have no interest in being fleeced. And who apparently have sufficient market power to force pharma companies to actually negotiate in the first place.

Looks like CP doesn't understand the fixed-cost argument. Once the fixed costs have already been spent, you don't stop providing the drug until the price is lower than your marginal cost. You "make money" as a going concern even if you've lost massively on paying back the initial investments. So yes, I honestly think that European companies selling products in Europe have negative returns.

The ability to sell at marginal cost in Africa (vs average cost) is one of the greatest humanitarian policies we've ever stumbled across. People advocating for re-importation, medical tourism, etc need to have their heads examined.

Well yes, they do need to have their heads examined because they're incapable of grasping economics. They don't realize or are in denial that reimportation will lower domestic prices at the expense of raising foreign prices, e.g. in impoverished Africa.

... does anyone here understand the causes and functioning of economic Black Markets ?

World Black Markets in any kind of "illicit" drugs are doing just fine.

Help me out here. I'm trying to imagine some hypothetical organization, a vertically-integrated "drug syndicate" if I may co-opt that term, that specializes not only in shipment and distribution of drugs but also in their manufacture and retail.

For logistical reasons, they might set up their base of operations very close to a rich market like the United States. Perhaps even right next door!

"much closer to cost": are you really encouraging economics students to suppose that there is a unique and unambiguous thing called "cost"?

I'm pretty sure they mean marginal production costs which includes a normal profit...

as opposed to prices well above marginal cost when a producer has market power.

The difference between price and marginal cost is one measure of efficiency.

The rebate on Sovaldi is huge, and would close a lot of the price difference if legislation forced rebates to be applied at POS. Trump is proposing this and being opposed by Pelosi. Support Trumps rebate at POS proposal!

>the alternative is no sales in developing countries or one world-price and you can be sure that if there’s one world-price that price will be the US price and not the Egyptian price.

That is pretty plainly untrue. What I am sure you meant to say, is that in a "free market", those are the alternatives. Of course, global health care is not a free market, and it is very silly to act like that is the case.

Any country with government provided universal health care requiring either no or trivial payments from patients to acquire drugs duly prescribed to them would not have to worry about the clandestine import of lifesaving drugs, or residents travelling abroad for medical reasons. Perhaps the solution is making healthcare a human right. Seems a little more humane than putting arbitrary (and ineffective) rules in place that place additional burdens on the global poor in order to obtain lifesaving medicine.

If you think health care is a "right," it demonstrates that you don't know what a "right" is.

You also don't seem to understand economics. This is basic supply and demand and basic price discrimination.

If you think health care is a "humane right," then dig deeply into your own wallet to pay for the health care of the impoverished.

Single payer nations do get to exploit some monopsonistic and regulatory power, but they cannot get all the drug they want at the lower price. There will be a shortage. There would not be this malum prohibitum trade but for those market restrictions.

You need to take (or re-take) Econ 101.

... That's not my argument at all. What I am advocating for is for:

1) Governments to negotiate with drug makers for access to their products. Inevitably, some of these will cost thousands of dollars a pill, but not much you can do there.
2) Make these medications available to their citizens for free or trivial cost.
3) Make up the rest in taxes.

This is an entirely plausible solution for countries prone to high drug pricing (i.e. rich countries).

Of course the argument here also completely undermines the standard benefit of free markets argument where the total surplus within the system is then shared between producer and consumer. The suggested model here is that producer (and most generally not even the producer but the corporation controlling the producers -- the brains that came up with the solution) can get it all.

That seems to bode poorly for market societies. However it does somewhat fit with the whole "you are now the product and your personal information is ours to sell" structure of the modern world.

I wonder what Adam Smith would think.... I'm pretty sure Marx is laughing in his grave saying "I told you." Pretty much a nail in the coffin of the Kirznrrian entrepreneur.

The sad thing is this is as much a regulatory and legal failure as perhaps a type of free, competitive market failure. It is not what I would call a healthy market structure that really serves the consumer. Perhaps this is really how Malthus's dismal outcome really occurs.

The minute they said "price discrimination" you should have immediately recognized a departure from the perfectly competitive equilibrium. In that model, a price discriminator indeed scarfs up all consumer surplus. This is not at all inefficient but does have distributional issues.

The upside of price discrimination, though, is that people who were heretofore excluded from consumption because they couldn't afford the market price are able to consume.

In order to price discriminate, the producer must 1) be able to segment the market and 2) prevent resale.

Given that poor people in Africa can be adequately segmented from Europeans by willingness to pay, the inability to completely undermine resale means that price will rise in Africa and fall in Europe. The greater the reimportation, the more price will rise in Africa. The end result is that far fewer poor people will get the drugs they need.

A good metaphor for the economics of regulation is putting a queen sized sheet on a king sized waterbed. As soon as you get three corners tucked, attempting to tuck the fourth corner will result either in one or more other corners becoming untucked or the sheet (or bed) ripping. People who see regulation as a solution to economic problems are forever playing this tucking game with their waterbed, and they look very silly doing it.

Of course but the point is that the argument to support price discrimination as a positive thing is rather tentative from the standard pro-market logic where markets serve both consumer and producer.

Last, it's clear that the ability to price discriminate here derives more from non-market factors than market factors and those aspect prevent the market equilibration process of arbitrage.

I think it's silly to say all market regulation is as you describe. Any good market is regulated to some extent. The extent that regulation is good will be reflected in what the market outcomes are. If we see tendencies to lower prices and higher quality via the competitive process then I think we can conclude we have pretty good regulation (which is really just defining the rule so engagement in the market).

The perfect competition model is only an ideal drawn on the chalkboard. Some amount of price discrimination will always exists -- and in some cases it's not even clear it's price discrimination. That term has been used to explain the various classes for seat in the plane, train or theater. But the reality there is you have different products with meaningfully different qualitative aspects.

This type of price discrimination should always be condemned if one claims any affinity for free market processes and market order societies. They might not be completely avoidable but that is a different issue.

'would not have to worry about the clandestine import of lifesaving drugs'

You seem to have missed this, the first example - 'The answer is that Combivir was priced at $12.50 per pill in Europe and, much closer to cost, about 50 cents per pill in Africa. Smugglers who bought Combivir in Africa and sold it in Europe could make approximately $12 per pill, and they were smuggling millions of pills.'

It is the price differential driving this market, no more, and no less.

What is going to be amusing to see is the scale of smuggling into the UK if a no deal Brexit happens in the next few weeks - a truckload of yogurt or cheddar or beef from the Republic of Ireland smuggled into the UK will be worth thousands per trailer load in avoided tariffs. And that is assuming the smugglers are only using Irish products, which at least meet UK standards presently. Want to guess how much the Irish government is going to cooperate with the UK to keep such smuggling in check? Yep, the Irish (who will be hurting from such tarifffs) are likely to say something along the lines of have fun taking back control. Followed by some Irish word I did not quite catch last weekend from an Irish woman describing the British - and even if I did hear it correctly, I would have no clue how to spell it.

Okay, and UK consumers would benefit, so what?

'so what?'

The domestic British meat and diary industry probably does not say so what, particularly as that is the simplest level of smuggling. A better example is taking cheap Brazilian meat imported into a bonded area in the Republic of Ireland that is then smuggled across the border - without being inspected at all. But as we have seen with the U.S. over the last generation, the only thing that matters is consumers and the price they pay.

Has patenting in drugs outlived it's usefulness?

Heresy - see how well extending patents in this area has worked?

Here is just one example of how to extend a patent, among a number at the link - 'New Versions

One trick companies use is to combine the medical components in a somewhat new way by coming up with a newer concoction of what is essentially the same medicine. They might make a drug more tolerable via numerous new methods. For example, they might change a particular intake to a slow-release, or they might change from one daily dose to two, or transition from an oral medicine to an injection.

Transcept's Intermezzo is an example of alternative delivery. The pill form of the drug, Ambien, had been in use for several years. Intermezzo, which dissolves under the tongue, has a lower dosage of its active chemical as well as faster activation and a slightly different effect on the user. Therefore, it qualified for a five-year exclusivity period, which offset the expiration of the patent on Ambien.' https://www.upcounsel.com/how-long-do-drug-patents-last

A five-year exclusivity period is not a patent, and the old drug becomes generic anyway. Without patents there would be no private drug R&D so no, patents for drugs have not outlived their usefulness

'Without patents there would be no private drug R&D'

Calling Dr. Baker to the MR courtesy phone, Dr. Baker, please answer.

'Dean Baker, an economist at the Center for Economic and Policy Research, believes a publicly funded system is possible. A start-to-finish government drug pipeline, he estimates, would result in an 80 percent drop in the $450 billion Americans currently spend on prescription drugs. He estimates that the government could fund the development and testing of new drugs for an additional $50 and $80 billion a year — roughly the amount of money drug corporations have made from the hep C treatment alone.

“The industry wants us to believe the government can fund good basic research, but is incapable of developing and testing new drugs,” says Baker. That is, of course, not true. “[The CISI] analysis shows the enormously important government role in developing new drugs. We should start asking questions about how the government can see the process through so [new drugs] could be sold at generic prices the day they are approved by the FDA.”

Baker also notes a government-run drug pipeline would likely result in safer drugs as well as cheaper drugs, as all clinical tests would be made fully public as a condition of funding.'' https://portside.org/2018-03-04/taxpayers-not-big-pharma-have-funded-research-behind-every-new-drug-2010

A bit more from the article - 'That’s why the cuts were especially unwelcome in the executive suites of drug and biotech companies. Their business models depend on Washington subsidizing expensive, high-risk basic research, mostly through the vast laboratory network funded by the NIH.

Just how important is our publicly funded research to Big Pharma and Biotech? According to a new study by a small, partly industry-funded think tank called the Center for Integration of Science and Industry (CISI), it is existentially important. No NIH funds, no new drugs, no patents, no profits, no industry.

The CISI study, underwritten by the National Biomedical Research Foundation, mapped the relationship between NIH-funded research and every new drug approved by the FDA between 2010 and 2016. The authors found that each of the 210 medicines approved for market came out of research supported by the NIH. Of the $100 billion it spent nationally during this period, more than half of it — $64 billion — ended up helping the development of 84 first-in-class drugs.'

I like the idea of
>>>
A start-to-finish government drug pipeline, he estimates, would result in an 80 percent drop in the $450 billion Americans currently spend on prescription drugs. He estimates that the government could fund the development and testing of new drugs for an additional $50 and $80 billion a year — roughly the amount of money drug corporations have made from the hep C treatment alone.
<<<
It makes a lot more sense than the perception at least of the present system, which seems to have a lot in common with the sector of the drugs industry that is defined as illegal, blackmail, extortion and crime.
The negative would be that the funding for the research would come from taxation, which some also see as extortion that us defined as being legal.
However there would be a saving to tax funds as well, from welfare budgets.
There is a problem in that rich countries would be subsidising poor ones, but this seems to be happening already so must be broadly acceptable.
Also the computer and semiconductor revolution may not have been possible without initial government funding for research that otherwise wouldn't have been done.
Pharmaceuticals ought to be put into some form of environment where they behave like semiconductors, so advancement can be made without price gouging early adopters to the point that they lose their lives or quality of life.

Well, "price discrimination" certainly sounds better than "all the traffic will bear."

In any case, the point of pain for First World countries comes when "healthcare is a right" collides with "securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

For if healthcare is a right and if patents provide a legal monopoly (although of limited duration) then there can be no limit on how much government, as guarantor of that right-to-healthcare, must pay to secure patented drugs for citizens.

When users must pay for their own drugs then that "all the traffic will bear" price is limited by individuals' ability to pay. But without that constraint price is limited only by governments' seemingly unlimited ability to pay.

Government rules and regulations strongly influence drug prices. Patents are an intentional way of giving exclusivity, i.e. closing the market to entrants, for the benefit of stimulating drug innovation. This may not achieve a perfect balance. Political processes result in a benefit to a small influential segment rather than the larger society. The Medicare Modernization Act of 2003 stops Medicare from haggling about price with Pharma; haggling is the essence of a free market. Imagine walking into a car dealer with a strong commitment to paying list price. Changing this law would be a good first step. Trump is experienced in marketing deals, and I think that the next Republican healthcare law should effect this change.

"The alternative is no sales in developing countries or one world-price"

Those are not the only alternatives.

The price of a drug should be based on PPP per-capita income of a country. It's reasonable that a drug in African should cost a small fraction that the same drug does in Norway.

Japan has set the price of Sovaldi at nearly half that of the US. But their PPP per capita is 30% below the US. Thus, they aren't helping to pull the wagon.

A reasonable stance a US president could take via policy would be to indicate that drugs sold in the US must not be sold for a premium over the PPP-weighted sales to the rest of the world. In other words, if the drug maker accepts Japan's maximum price on Sovaldi, then it means that would reduce the price of the drug in the US, too.

In other words, if a nation isn't will to pull their fair share, then no drug for them.

'if a nation isn't will to pull their fair share, then no drug for them'

The Indians have already demonstrated they will ignore the 'no drug for them' part, if they feel the need. It helps to have your own pharma manufacturing industry, of course.

>The Indians have already demonstrated they will ignore the 'no drug for them' part, if they feel the need. It helps to have your own pharma manufacturing industry, of course.

If they want to ignore IP laws and will manufacture a modern molecule they didn't invent, then not only will they not get the drug, they also won't get the software and integrated circuits needed to put their satellite into space.

India's satellite accomplishments this would would not have happened without integrated circuits from the US. India is currently manufacturing 180 nm integrated circuits on 200mm wafers. That is very early 2000 technology. In other words, they can manufacture a 600 MHz pentium processor.

'then not only will they not get the drug, they also won't get the software and integrated circuits needed to put their satellite into space'

Guess it depends on what the Chinese/Taiwanese say about that, doesn't it? The Chinese being another example of a country that really has no problem ignoring whatever they want to, in their own interest.

Those that manufacture products get to decide who to sell to, after all.

(As a note - NASA does not use cutting edge products in spacecraft, which is not the same as launching or developing satellites, admittedly. 'NASA’s Orion spacecraft, which launched on its first test flight last week, is at the very forefront of space travel technology. However, it might surprise you to learn that its computers are positively ancient by terrestrial standards. Future crews of Orion missions bound for asteroids, Mars, and beyond will be relying on a single-core processor that first debuted 12 years ago, and it’s probably not even as powerful as the one in your smartphone.

If you follow the state of space exploration, that fact might not surprise you at all. The name of the game in space is reliability, not speed. Bleeding edge hardware is great when you’re on Earth, but in space astronauts are completely reliant on technology for survival. Components have to be tested again and again, then hardened against every foreseeable circumstance to make for the safest flight possible. That’s why Orion’s flight computer is a clunky Honeywell console originally developed for use in Boeing airliners. Powering this beast is an IBM PowerPC 750FX, which first hit the market in 2002.' https://www.geek.com/chips/nasas-orion-spacecraft-runs-on-a-12-year-old-single-core-processor-from-the-ibook-g3-1611132/)

> Guess it depends on what the Chinese/Taiwanese say about that, doesn't it?

Not really, since they are merely fabricating western designs. Taiwan doesnt' just get to sell an ARM core or a Qualcomm baseband transceiver to anyone they wish. Both ARM and QCOM put restrictions on who can use their IP. A country that doesn't abide by global IP laws could find it very difficult to get IP for building even a Wifi part.

> The name of the game in space is reliability, not speed.

Yes, and modern hardening techniques are vastly superior than those of 20 years ago, in spite of shrinking geometries. Mitigation occurs through redundancy. That is happening even today in modern SoC used in critical subsystems like throttle control in cars. FPGAs are being used in space! The fact that Xilinx is addressing the satellite market and getting design wins tells you that speed is given a much, much higher priority than you believe.

That said, if you think SpaceX landing a rocket ship vertically could be done with silicon from the early 2000s, then I'd say probably not.

> That’s why Orion’s flight computer is a clunky Honeywell console originally developed for use in Boeing airliners.

SpaceX is using modern dual core processors, triply redundant. And modern OS and development tools, including Chromium for the UI.

Modern sats and rockets don't exist as we know them without modern silicon.

Europe imposes import restrictions and generates smuggling to meet demand. Sounds like it works fine to me, the smugglers should win one for capitalism here. Who is complaining?

But then again, when is come to methamphetamine and fentanyl, I can change my position and be just a hypocritical as the rest of us.

"if there’s one world-price that price will be the US price and not the Egyptian price"

This seems to be a ridiculous assertion Alex. The price would likely fall somewhere between the two. Why should American's be forced to subsidize the price?

The developing world program is mostly a humanitarian program and doesn't bring in any serious profit. Thus, if the firm were required to charge one-price all over the world, the price would be much closer to the US price.

(Assuming no other changes. I agree there are other alternatives.)

Will technology one day make drug importation policy irrelevant? For example, will so-called "personalized medicine" allow drug companies to do perfect price discrimination? The barcode method mentioned in the post also seems pretty effective. One could imagine, in the name of "patient safety", drug companies designing security mechanisms in bottles such that only the targeted patient can open the bottle, similar to the way some software often can only be installed on certain machines. For that matter, if drug companies started shipping medicines direct to consumers instead of through bulk shipments through intermediaries, then that would also seem to make it much harder to divert medicine into black markets.

The point is that, if medicines were ever allowed to move unrestricted across borders, the drug companies would respond by designing their distribution system to enforce their price discrimination policies. Cutting off supply to low-income countries would be only one such method.

Given how easily most drugs can be re-engineered in developing nations and produced - at scale - you can rest assured that the one-world price will be the Indian/Egyptian price, not the US price. MSF will just need to expand the set fo firms it works with.

Comments for this post are closed